Europe needs a People’s Plan: more jobs, higher wages

This morning I’m in Berlin for the 12th British-German Trade Union Forum, talking with fellow trade unionists from two countries with a similar tradition of manufacturing and strong unions. We’re discussing the future of the European economy and labour market, and this is an edited version of the remarks I’ll be contributing.

Austerity has failed. The IMF has admitted it: wrong over the multiplier, wrong over Greece. The European Commission has taken its foot off the austerity pedal.

The main problems facing Britain are the cost of living, worsening public services, youth unemployment. Even in Germany, polls suggest people are worried about the future their children will face.

But while it may be failing economically, austerity is still winning politically.

This week, the British Government came back for more public spending cuts, even though the medicine of austerity is making the patient worse. And we’ve only had austerity-lite from the European Commission: cutting more slowly rather than a sustainable economic policy.

The British public has never believed that the cuts will fall fairly on rich and poor alike. And they’ve come to realise that they’re not working: they’re making things worse rather than better.

But one poll number hasn’t changed significantly in Britain: and that’s the number of people who think that the cuts are necessary.

Necessary because the last Labour Government allegedly ‘maxxed out’ the nation’s credit card; was, they say, profligate, and spent too much on schools and hospitals; and should, like a household burdened with debt, cut back for a bit until the budget balances.

Economically, this makes no sense. But people are worried, and some of them are scared.

They see an economy that they feel is out of their control, out of anyone’s control. Changes in the way we work, in the families we live in, in the communities we share, have become the only constant.

Globalisation has opened up a Pandora’s Box, and let all sorts of new experiences into our world. People are exhilarated by some aspects of the roller-coaster ride they are now on, but they are scared too.

We, the trade union movement, together with our progressive political partners, need to give them hope.

We need to set out an alternative that addresses their concerns, meets their needs, and solves their problems.

The new DGB-proposed Marshall Plan for Europe would inject demand back into the European economy. It would renew our infrastructure, create sustainable jobs, and raise productivity through skills training and research & development.

It also needs to tackle the burden of debt that bailing out the banks stoked up. The Marshall Aid the UK received 65 years ago was used to pay down the national debt, as well as create institutions like the National Health Service, and to build decent houses for working people.

But our Marshall Plan must be different from the one the USA implemented. We don’t want the ideological baggage that came with it, the Cold War mentality that divided Europe. We want a Plan built on the European trade union values of solidarity and equality.

In short, we need a People’s Plan for Europe.

If we are going to address the short-term problem of stagnant demand – and if we are to redress decades of growing inequality – Europe’s workers need a pay rise.

I’m glad to see that Chancellor Merkel is now committed to a minimum wage. It is a real achievement that German trade unions have convinced her that this will help win the election.

Of course, a minimum wage is only a floor, and on its own it is not enough to wipe out low pay. In Britain, the low wage economy is becoming partnered with a low productivity economy.

To rebuild demand, equality and the sort of social market economy that Germany used to be famous for, we need stronger real pay growth and the creation of more, better jobs, in higher value sectors.

We need to think through what new institutions we need to deliver this. In Britain, we are looking at renewed Wages Councils, but also at the German experience of supervisory boards with worker representation.

We’ve persuaded many people that one of the solutions to rampant excess in boardroom pay is to put workers on the remuneration committees.

But workers on the board could be a game changer for everyone’s wages, and stimulate the sort of long-term investment that we need to create a new, sustainable, social Europe: ‘responsible capitalism.’

When Europe’s economic woes are analysed, the response is often ‘supply-side’ reforms. That always seems to mean worse terms and conditions for our members: lower wages, longer hours, fewer rights.

That doesn’t work economically either. And it isn’t fair. Why should our members have to pay for a crisis they didn’t cause?

But we do need to address the supply-side. We need to re-balance our economies and labour markets.

We need stronger regulation of the labour market to protect people from the creative destruction of capitalism: zero hours contracts, unpaid internships, the so-called midi-jobs.

We should extend legal protections to groups like domestic workers by ratifying the ILO Convention on Domestic Workers’ Rights.

A modern industrial policy, corporate governance reforms, and other measures to encourage long-term rather than short-term investment, like a financial transactions tax.

That’s the way we can ensure we get growth that is sustainable, equitable, and that generates decent, well paid jobs. A new economy that works in the people’s interest, not the bosses’.

Written by Frances O'Grady

Frances O'Grady is General Secretary of the TUC, and is the first woman ever to hold this post. She was on the Resolution Foundation's Commission on Living Standards, and has been a member of the Low Pay and the High Pay Commissions. Frances is a str…